UK Expat Relocation Practices – How they Differ from those in North America

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At first glance, relocation practices in the UK appear very similar to those in the US. But a closer look reveals some significant — and often costly — differences.

Any comparison of the UK relocation industry with that in North America has to focus primarily on the differences in these two locations’ real estate agency systems. At first glance, they might appear broadly similar. Certainly, we both use similar industry jargon, but once you roll up your sleeves and get into the nitty gritty of UK property transactions, you soon find yourself operating in a completely different world. So let’s take a closer look at how UK residential real estate agency works.

No training, qualifications or licensing required

Real estate offices are called estate agencies. The vast majority trade from high street, store-like, retail premises, and rely largely on passersby for their prospects.

There is no licensing of estate agencies, or any requirements for training or qualifications. Anyone can set up an estate agency business overnight.

Estate agencies are staffed by salaried employees. Whilst there is usually some commission or performance-based element in their compensation, commission to the individual plays nothing like the same role as it does in a North American real estate office.

The employees, referred to as negotiators, are not self-employed, independent contractors. They are on the payroll, and their business expenses are paid entirely by the employer. Mostly, they are between 20 and 30 years of age. Their major attraction to the job is the customary perk of a fully expensed company car. For many of these youngsters, this is the most important part of their compensation package.

No Multiple Listing Service

Another major difference is the absence of any MLS. Estate agencies do not cooperate with one another (except, to a limited extent, in downtown London where some agencies work together on an informal basis). There is no differentiation made between the “listing” and “selling” sides of a transaction. The listing (instruction) is handled by the whole estate agency firm. Similarly, homeseekers deal with the firm as a whole. There is nothing that compares with the individual attention given in the North American system where homeseekers are looked after by an independent contractor who is effectively running his or her own business within a business. In the UK, walking into an estate agency is more like walking into any retail store. You are served by whoever is available at the time you walk in or call.

A free-for-all

Although valiant attempts have been made over the years to start up local MLS-type systems, they always fail. This is due chiefly to the wholly uncommitted nature of the homeowner/estate agency relationship, as well as the lack of any overall regulation of the UK estate agency industry.

The relationship between the homeowner and estate agency lacks commitment because homeowners in most areas can simultaneously instruct or list their property with an unlimited number of estate agents in what is called a multiple (open) basis. Only the estate agency that introduces the buyer (or tenant) earns the commission.

Homeowners often start marketing their homes by instructing only one estate agency on what is called a sole agency basis, but the homeowner can convert to a multiple basis at any time simply by instructing other agencies. Other agencies are also free to solicit their competitors’ instructions by approaching homeowners directly. Many systematically canvas homes listed with their competitors. In fact, when a new estate agency opens its doors, this is their fastest way to “stock up.”

Under these free-for-all conditions, you can easily see why estate agencies are reluctant to get involved with any MLS-type facility. It would mean notifying their competitors of all their listings — and those competitors would have every reason (covertly or otherwise) to go and poach them! This, of course, puts ordinary homeseekers to the trouble of having to visit numerous estate agencies if they want to gain access to all available homes, which, in turn, takes away the need for an MLS. The other side of the coin is that homeowners may have to instruct numerous estate agencies to reach the majority of potential homeseekers currently in the market for a home.

This all combines to produce an inefficient, “hit or miss” cycle which is self perpetuating. Add to that the low level of compensation available to estate agency owners and their staff — a factor that has become increasingly evident since the catastrophic post-1988 crash in property values — and you can easily see why the UK estate agency industry is found so wanting by North Americans accustomed to comprehensive service delivered by properly trained and regulated professionals.

Counting the costs

These differences in the two real estate industries should not be underestimated. They have led many transferees from “your side of the pond” (whose employers thought they’d be saving a few bucks by not providing professional homefinding assistance) into serious trouble. (Guess who picked up the tab?)

Consider also the number of North American corporations who thought an offer was an Offer (or that an estate agent’s opinion of value was even remotely equivalent to a Broker Opinion or appraisal). They made equity advances only to wind up with an awesome capital loss, which could have been avoided.

Indeed, these differences are so significant they have prevented any of the major North American real estate franchises, in spite of their tremendous resources, from establishing any kind of presence in the UK — potentially the most lucrative of all European markets due to the considerable advantage of a common language. Yet these same organizations have successfully established themselves in locations where the obstacles appear to be far greater — Japan, France, Spain, the Far East, etc.

Every cloud has its silver lining

All of this, of course, presents an exciting opportunity for any UK relocation company that specializes in looking after North American corporations (and their home-based relocation service firms) that are transferring employees in and out of the UK. Both in homesales and homefinding the UK relocation company becomes directly involved in the daily details of every real estate transaction, right at the “sharp end” so to speak. There’s no way we can place the same reliance and faith in our real estate agents as you do in yours.

Homefinding assistance

This factor probably looms largest in the area of homefinding assistance. The UK relocation company’s own personnel must carry out most of the functions which, under the North American system, would be carried out by real estate agents. Over here, the relocation company’s role is much more “hands on” from start to finish.

Once the assigned homefinding consultant has consulted with the transferee and spouse (usually well in advance of their departure from North America) concerning their home and lifestyle needs, the consultant delivers a specification by overnight fax to every estate agency servicing the chosen area. Suitable homes are faxed back to the relocation company and the assigned homefinding consultant prescreens them. A short list is developed for presentation to the transferee and spouse to make their housing visit as productive as possible. This is really the only efficient way to organize a cost effective housing visit. Without such support, the visit will need to be much longer to allow transferees time to try and do all the research and legwork themselves. In practice, without homefinding assistance, they may well have to make at least two pre-reporting trips.

The relocation company then takes the transferee and spouse on a tour to see the short list of homes, schools and other amenities. Since the preparation has been done in advance, a great deal can be accomplished in just a few tour days. The home and school can be quickly sorted out, eliminating the necessity for an elongated stay in expensive temporary accommodation.

Beware estate agents in disguise

As mentioned earlier, estate agencies act strictly for the homeowner, and the system is very much one of caveat emptor — let the buyer beware. In the UK there are no requirements for the disclosure of property or title defects that compare to those in North America.

So, you may well ask, if the estate agency acts for the homeowner, who looks out for you and your transferee? In the UK system, only an independent relocation company can fully protect your interests. Be on your guard against estate agencies masquerading as “free” relocation/homefinding services. They represent homeowners, never you or your transferees. In the end, the cost of using their services can be substantial.

Homesale assistance

Again, with homesales, the UK relocation company’s involvement is more “hands on.” In order to access the homebuying population, it may be necessary to instruct or list with numerous estate agencies. Keeping all of them motivated is no small challenge. They are used to working on the basis of “if you throw enough mud against the wall eventually some will stick.” Homes in inventory should never be dealt with on this basis.

Once an “offer,” (which is not really an Offer in your terminology) has been received, the challenge is keeping the property fully on the market until a contract (the first and only time the agreement is put in writing) is in place. It is during this high risk period between proposal and contract that the infamous gazumping and gazundering takes place. Those issues warrant more discussion than given here, but understand that it is during this period that you must be prepared for the real negotiating to take place. It is also during this time that due diligence is done (both as to legal title and defects in the property’s fabric and services), to arm the buyer with the necessary ammunition to successfully negotiate. After the contract (which is almost always unconditional) has been signed, it usually takes about 28 days to close the transaction.

To adequately protect your company and your transferees, your UK relocation company (or the UK service provider used by your home-based relocation firm) must be sufficiently familiar with the vital real estate differences that exist between the two locations.